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After California pot stockpiles go up in smoke, what's next?

The Lowell Sun

Updated:
01/28/2018 08:49:37 AM EST

FILE - In this Jan. 12, 2018 file photo, a bud tender prepares marijuana for a customer at Med Men a dispensary in West Hollywood, Calif. California's marijuana industry has been living off borrowed time _ most sales being made in the state's new legal market involve cannabis stockpiled by retailers last year. The transition to new weed is coming with an array of rules and testing and questions about whether it will get to store shelves. (AP Photo/Richard Vogel, file) (Richard Vogel)

LOS ANGELES (AP) -- Like many pot shops in California, the Urbn Leaf in San Diego bulked up its inventory before legal sales began on Jan. 1, stockpiling enough marijuana to last for months because no one knew what the era of legal pot would bring.

The shop, along with others involved in the state's fledgling cannabis economy, are now concerned that too few operators have been licensed to support a pot pipeline of state-approved growers, distributors and retailers.

In some cases, they say, bottlenecks have already slowed the supply chain from fields to storefronts.

"They are going to have to come online with more producers in the next 12 months to keep up with the demand," said Will Senn, the founder of Urbn Leaf who operates three dispensaries and plans to open three more, including one in Los Angeles.

"The black market will balloon if we can't get legal, licensed producers to step into the industry. That's the biggest risk," he said.

Nearly a month after legal sales began for adults in the nation's most populous state, the longstanding medicinal and illegal marijuana markets are still transitioning to a multibillion-dollar regulated system, estimated to eventually reach $7 billion in value.

Questions about the supply chain represent just one example of early obstacles that range from complaints about hefty taxes to the refusal of most banks to do business with pot companies because the drug remains illegal on the federal level.

In one way, the arrival of legal sales has been a story about borrowed time.

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Most of the pot now being legally sold in California comes from plants that were harvested last year, and those reserves can be sold until July 1, provided they have required labeling.

Lori Ajax, the state's top pot regulator, said officials are aware that those initial supplies will eventually dry up but it's too early to tell how the legal supply chain will work.

"We legalized cannabis -- you want to have that product available," she said. "We don't want people going to the black market because they can't get product from the legal market."

In Santa Cruz County, TreeHouse dispensary CEO Bryce Berryessa is already having trouble keeping some popular brands on his shelves.

The problem, he says, is smaller producers haven't been able to obtain licenses, either because they are in an area where growing is banned by local government or they haven't been able to obtain a license from their hometown government.

Operators are required to have state and local licenses to conduct business, but must get the local one first.

Without money to relocate to a pot-friendly community, "they are going to be unable to find a pathway to legally sell their products," said Berryessa, who sits on the board of the California Cannabis Industry Association.

"I think this affects a large portion of California cannabis businesses throughout the state," he said.

For now, legal sales for adults appear to be robust in San Diego, Los Angeles and San Francisco.

But the patchwork of local regulations -- some cities and counties have banned all commercial activity -- has erected barriers to getting pot from place to place.

Some longtime growers are marooned in counties that don't allow pot or have imposed regulations so tight it's tantamount to prohibition. In some cases, investors are backing away.

For example, in previously pot-friendly Calaveras County, officials reversed course and banned commercial marijuana farms, leaving growers in a bind.

Without a local license, "it doesn't matter how incredible their products are," Berryessa said.

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